Sunday, February 04, 2007

The Carbon Emitted in Producing the Goods We Import from Abroad

Many environmental initiatives focus on controlling emissions at the source – that is, they try to impose limits at the point which carbon is put in the air, whether it is coming from a coal fired power plant or a car’s engine. But as I see it, when we use a product made in China, we also become responsible for the carbon emissions related to its manufacturing – in China. My question is: Is this a significant number? How much carbon was out into the air to manufacture all the other products that we consume here in the United States.

I used 2 different “back of the envelope” calculations yielding similar results – that the carbon emitted in the atmosphere in producing the goods we import in the United States is equivalent to around one quarter of the carbon emitted from ALL domestic activities in the US. As the chart below shows, this means that environmental activists who are worried about carbon emissions from transportation in the US, should be as worried about the carbon emitted from the goods they buy which are “Made in China”.

Here is how I came up with the calculations.

Method A: My back of the envelope

We can figure out the dollar value of all the goods produced in the US (Row 3), and we know the total amount of imports of goods into the US (Row 4). We know the amount of CO2 equivalents emitted to produce those goods (Row 6), so if we assume that it takes as much CO2 emissions to produce goods in the US as outside the US, we can calculate an estimate of how much carbon was used to create those goods. However, I imagine that the US has better environmental standards than some of its major trading partners like China, so one could also assume that this is a pretty conservative estimate.

Method B: My back of the envelope based on some real research found on the net

Looking around the internet, I came across references to a study by Shui Bin and who had calculated the following:

“The United States, because of its trade with Canada and Mexico, was responsible for 92 million metric tons of carbon dioxide in addition to what it emitted within its own borders. That's an amount equivalent to 2% of total U.S. emissions that year… The researchers next turned to trade with China. They looked at the period from 1997 to 2003, posing a hypothetical question: if the United States had manufactured the products it imported from China, how would that have affected each nation's CO2 emissions? Their conclusion: American emissions of CO2 would have been 3% higher in 1997, and 6% higher in 2003, if the United States had been manufacturing products that it imported from China.

Unfortunately, I couldn’t find any data regarding the carbon emissions related to ALL imports, but given that Canada, Mexico and China are the US’s top 3 trading partners and responsible for almost 42% of all imports to the US, I thought one could extrapolate based on the amount of trade they do with the US. The chart below shows radically different results, if one extrapolates from Canada and Mexico rather than from China. But if we assume that the discrepancy is due to the kind of goods we import from those countries, and we further assume that the imports from the 3 nations together are representative of the types of goods we import from all countries, then it would be fair to average the two numbers – leading to an estimate of 28%, close to the average used in my calculations.

Now, I imagine that the fact that the results are so close is more coincidental than anything. These are ‘back of the envelope’ calculations. But nonetheless, given that the total value of goods imported into the US is more than 2/3rds of the goods we produce here, there is little doubt that significant amounts of carbon were put into the atmosphere to produce the goods we use here!

[BTW - I am using carbon here to denote all greeen house gases, or carbon equivalents.]